“How much do I deserve”, “what are the terms of the grant”, “is it possible to receive both grant and participation in fixed expenses”, “how to calculate the amount of compensation” and “can the system be bypassed and receive the compensation even if the conditions are not met?” – All these, and other questions have reached the Globes system and have also surfaced on social networks over the last day since the government announced on Friday, the NIS 8 billion aid program, to self-employed and small businesses affected by the significant decline in economic activity during the Corona crisis.
The aid plan includes a grant for participation in fixed expenses that can reach up to NIS 400,000 per business, depending on the degree of decline in its activity, as well as the second stage of the extended aid grant for the self-employed, where self-employed persons are entitled to a grant of 70% of their taxable income, and up to NIS 10,500. The headlines are beautiful, but the formulas are not so simple to understand, and not because the question marks began to float.
To help deal with the labyrinth of formulas, “Globes” and the tax advisers’ office, led by tax adviser Yaron Gindi, gathered all the questions and answers that have been raised, and most importantly answer the question that really matters to business owners: who is eligible, how much and how to use it.
Part One: The second beat of the grant to self-employed
Let’s start with the “easier” section for understanding in the Relief Program published: The Second Stage of the Business Grant. This is a grant that the state has already granted to more than 100,000 businesses for the fall in their revenues in March, which has now been extended to April-June, and includes improvements over the previous grant. The grant in this pulse is intended for all self-employed persons (including those who received the first pulse) provided that they meet the conditions for receiving it, and in addition, salaried employees are entitled to the grant, while in the first pulse they were not entitled to speak.
Is the grant double for paying taxes and Social Security?
Like the first-stage grant, the second-stage grant is also liable to pay income tax, but is not liable to insurance premiums and value added tax.
What are the threshold conditions for grant eligibility for self-employed people?
Yaron Gindi: “The plan includes a number of threshold conditions for receiving the grant, including that the business is incorporated as an exempt or licensed dealer in the heart and the business owner turned 20 in 2019. In addition, the dealer must declare that the business was active on February 29, 2020, and that it estimates that from March to June 2020 ( The 4-month cycle) will reduce the transaction cycle by at least 25% over the same period last year (March-June 2019) .If it turns out that turnover has not been reduced in accordance with this statement, the dealer will be required to repay the grant.
“Another significant threshold condition is that the total taxable and exempt income of the business – including exempt residential mortgages, exempted annuities and the like, and excluding land praise and capital gain – in 2018 or 2019, did not exceed NIS 1 million a year. Of the business after allowable deductions (deduction of business expenses), and before offsetting losses. ”
In contrast to the grant in the first phase, the grant in the second phase does not include threshold conditions according to spouses whose joint income exceeds NIS 340,000. According to Gindi: “Under the terms of the second grant, joint income of the couple will be shared equally between them.”
Another condition for receiving the grant is that the average monthly income of the business in 2018 (or 2019) did not decrease from NIS 714 per month.
According to which income will the grant amount be calculated?
Gindi: “Eligibility for compensation and the amount of the grant will be determined according to 2018 data provided that a report is submitted for this year, but if the business was opened from 01/01/2019 to 01/10/2019 or opened in 2018 and there was a loss this year, his entitlement to compensation will be assessed according to 2019 report, provided annual report is submitted by 12/07/2020.
“Anyone who started the business after 1/3/2019 will calculate his turnover in terms of comparing turnovers in 3-6 / 2020 as the average turnover in the period from the beginning of his business to 29/2/2020, multiplied by 4. Whoever started his business after 1/10/20 2019 is not eligible for a grant. ”
What is the amount of the grant to the self-employed?
The regulations stipulate that the grant to the self-employed will be equal to 70% of the average business income per month, but not more than NIS 10,500, but to the self-employed whose average income from the business per month exceeds NIS 40,000, the amount equal to 17.3% will be deducted. The average income from a business per month is about NIS 40,000.
In addition, the regulations stipulate an increase in the amount of the grant to the self-employed worker in a small business whose average monthly turnover exceeds NIS 1500, but does not exceed NIS 25,000; for an independent person whose average turnover per month exceeds NIS 1,500 but does not exceed NIS 8,333 – NIS 700; For an independent person whose average turnover per month exceeds NIS 8,333 but does not exceed NIS 16,667 – NIS 1,875; For an independent person whose average turnover per month exceeds NIS 16,667 but does not exceed NIS 25,000 – NIS 3,025.
Gindi: “Dealer whose average monthly income from a business in 2018 or 2019 was over NIS 40,000 and up to NIS 83,000, the grant will be reduced, so that for every NIS over NIS 40,000, 17.3 cents will be deducted. Beyond the million dealers, he loses his eligibility for the grant. The criteria and whose monthly income from a business and gross occupation was NIS 15,000 a month, will receive the maximum compensation of the grant of NIS 10,500, while those whose monthly income from a business and gross occupation was only NIS 12,000 will be entitled to a grant of only NIS 8,400. ”
What are the threshold conditions for grant eligibility for an employee controlling shareholder?
The grant will be granted to an employee with controlling interest in the active company in the six months preceding April 2020, who will be 20 years old in 2019. The grant will be granted subject to the following conditions: Taxable income of the controlling shareholder for tax year 2018, defined as income after deductions deducted and deducted and deducted from it, together with the taxable income of the few company in which he had control, directly or indirectly, in his receipt. The company’s profits do not exceed NIS 1,000,000.
It should be noted that this is income from all sources under the Income Ordinance, but does not include the individual’s capital gains and his land appreciation; The average monthly income for a controlling employee exceeds NIS 714 a month; The turnover of the company in which the employee had control over the period from March 1, 2020 to June 30, 2020 decreased in relation to his turnover in the corresponding period in 2019, amounting to more than 25% of the total turnover for 2019.
It should be noted that the filing of a periodic VAT report by the company in which the employee had control over the said periods is a condition of eligibility for the grant; The Employee and the Controlling Company filed, until the date of claim for grant, an annual report under Section 131 of the Income Tax Ordinance for 2018; The company where the employee had no control over various accounting bookkeeping violations under the Income Tax Ordinance, as stated in section 17A of the Work Grant Act.
Another condition is that the controlling employee is not entitled to unemployment benefits for the period from October 1, 2019 until the day of filing a claim for the grant.
It should be noted that even a controlling shareholder in the company that began operations in 2019 has adjusted some of the required conditions, so that they will be assessed in accordance with the data for 2019, instead of 2018.
Gindi demonstrates: “Eyal holds 40% of the shares of” Compensation Ltd. “The company’s taxable income in 2018 was NIS 1,200,000 and Il’s gross labor wage is NIS 250,000 and income from rent is NIS 100,000. The Company’s relative taxable income is NIS 480,000 (1,200,000 * 40%) + plus its annual income of NIS 250,000 from salary, plus income from renting NIS 100,000, the total income of the controlling shareholder in the NIS million ceiling is NIS 830,000. Under conditions.
What is the amount of the grant for salaried employees?
Like the self-employed, the grant to a controlling employee will amount to 70% of the average monthly income, but not more than NIS 10,500. For a controlling employee whose average monthly income exceeds NIS 40,000, an amount equal to 17.3% of the amount in which his average monthly income exceeds NIS 40,000 will be deducted. In addition, the compensation is limited to NIS 10,500 for all companies in which the controlling shareholder receives wages.
How do I apply for a grant and when will it be approved?
Filing claims for grants will be possible in early May 2020 through an online form on the Tax Authority website. Once the claim is approved, the payment will be deposited into the Independent Bank Account within a few days. Controllers will be able to file a claim as of May 18, as additional assessments are required to review their eligibility.
Gindi: “Other Things to Know: The grant application will be approved within 5 days of filing and will be paid within 5 days of its approval; will not be able to receive a grant from a bookkeeper or controlling company who was required to manage books in 2018 and did not manage and / or disqualify his books; the dealer or company reported The VAT reporting period for March-June 2020; For VAT-exempt dealers reporting for 2020, they will be required to report the cycles for the period March to June 2020 in addition to reporting on the annual cycle; the grant cannot be liened and / or foreclosed but for the payment of alimony;
Part Two: Participation in Fixed Expenditure Model (Based on Formulas and Principles of the “Cliff Eitan” Compensation Model)
Tax Advisor Yaron Gindi: “The model provides different compensation to three business groups. The first route is for businesses with a turnover of up to NIS 300,000 in 2019. The conditions for receiving the grant are: a minimum transaction turnover of NIS 18,000 in 2019, a decrease in the transaction cycle 3-4 / 2020 compared to Turnover 3-4 at least 201% (businesses whose turnover decreased by less than 25% are not eligible for compensation).
“The second track is a grant track for businesses with a turnover of NIS 300,001 to NIS 1,500,000 in 2019. The principle in this group model is to multiply the transaction cycle in March 3-4, 2019 in the supplemental component of saved expenditure (expenses that were not taken out due to the decline in business activity). This is a supplementary component of the saved expense, which is a fixed 30% (without calculation). The resulting result is multiplied by the percentage of compensation that comes from the table, which states that when the rate of turnover is between 0-25%, the compensation will be 0%; A 41-60% reduction will earn 20%; between 61-80% a 35% reduction; and 81-100% will receive 50% compensation. ”
The latest route includes a grant for businesses with a turnover of NIS 1,500,001 to NIS 20 million in 2019.
Gindi: “The principle in this model is a multiplication of cycle 3-4 of 2019 in the supplementary component of the saved expenditure. In this group, the supplementary component of the saved expenditure is calculated according to the formula in the definitions or 30%, whichever is the lower. The rate of decline in the cycle is between 0-25%, the compensation will be 0%, a 25% -40% reduction in 10%; a 41-60% reduction in 20%; a 61-80% reduction will result in a 35% reduction; And between 81-100% will receive 50% compensation. ”
What is the level of compensation?
For businesses with turnover up to NIS 300,000:
Businesses with turnover of up to NIS 100,000 in 2019 will receive a one-time grant of NIS 700.
Businesses with turnover of NIS 100,000-200,000 in 2019 will receive a one-time grant of NIS 1,875.
Businesses with turnover of NIS 200,000-300,000 in 2019 will receive a one-time grant of NIS 3,025.
For businesses with turnover of between NIS 301 and NIS 1.5 million:
The compensation is a one-time grant granted for the months 3-4 / 2020 and does not exceed NIS 400,000.
For businesses with turnover between 1.5 million and 20 million NIS:
The compensation is a one-time grant granted for the months 3-4 / 2020 and does not exceed NIS 400,000.
What about businesses that opened in 2019? Are they entitled to compensation?
Gindi: “Dealer whose operations began after 1/1/2019, his transaction cycle for comparison to the transaction cycle in 3-4 / 2020 will be the average of his transaction cycle in the period from one month after the opening of the business to 31/12/2019, multiplied by 2.”
When can you apply for compensation, and how?
Gindi: “An application will be submitted within 90 days of May 12, 2020, using an online form that will include the required data for determining eligibility and payment.”
Examples of the grant amount in the various tracks:
Business examples with turnover up to NIS 300,000 in 2019
Example 1:
Annual turnover 2019: NIS 60,000
Monthly income NIS 4,000
One-time grant: NIS 700
Pulse grant 1: NIS 2,600
Pulse grant 2: NIS 2,800
Total grants: NIS 6,100
Example 2:
Annual turnover 2019: NIS 200,000
Monthly income: NIS 12,500
One-time grant: NIS 1,875
First-rate grant: NIS 6,000
Second beat grant: NIS 8,750
Total grants: NIS 16,625
Example 3:
Annual turnover 2019: NIS 295,000
Monthly income: NIS 15,000
Current grant: NIS 3,025
Pulse grant 1: NIS 6,000
Pulse grant 2: NIS 10,500
Total grants: NIS 19,525
Business examples with turnover between NIS 300,001 and NIS 1,500,000 in 2019
Example 1:
Turnover 3-4 / 2019 – NIS 300,000
Turnover 3-4 / 2020 – NIS 100,000
Turnover drop rate: 66%
Supplemental Saved Spending: 30% (fixed in a business group with this cycle)
Compensation: NIS 31,500
Example 2:
Turnover 3-4 / 2019 – NIS 250,000
Cycle 3-4 / 2020 – Zero
Cycle drop rate: 100%
Supplemental Saved Spending: 30% (fixed in a business group with this cycle)
Compensation: NIS 37,500
Business examples with turnover between NIS 1,500,001 and NIS 20,000,000 in 2019
Example 1:
Turnover 3-4 / 2019: NIS 800,000
The 2019 turnover: NIS 5,300,000
Turnover 3-4 / 20: NIS 400,000
Inputs 2019: NIS 3,000,000
Savings expenses saved: NIS 750,000
Cycle drop rate: 50%
Compensation: NIS 48,000
Example 2:
Turnover 3-4 / 2019: NIS 3,000,000
2019 turnover: NIS 18,000,000
Turnover 3-4 / 20: NIS 200,000
Inputs 2019: NIS 10,000,000
Savings expenses saved: NIS 3,500,000
Cycle rate drop: 93.4%
Compensation: According to the formula for calculating the compensation reaches NIS 450,000, but the plan includes a limitation of compensation up to NIS 400,000.
The article was originally published in Globes
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